America's Attempt to Enforce Its Ban on In-Flight Gambling Extraterritorially

Blackjack At Thirty Thousand Feet: Ainerica's Atteinpt To Enforce Its Ban On In-flight Gainbling Extraterritorially Steven Grover (Note: This article is reprinted with the permission of the author and the Texas Wesleyan Law Review. 1 The law review format of numbered footnotes explained on each page has been changed for this issue of the Gaming Research & Review Journal. Footnotes have been converted to Endnotes.) Introduction In an attempt to raise revenue and provide an entertainment option for pas sengers, a number of international airlines servicing the United States want to intro duce in-flight gambling.This feature would allow passengers eighteen years or older to use credit cards to play blackjack, roulette, and poker from video screens fixed to their seats. The United States represents forty percent of the world's air travel market and in-flight gambling would provide extra revenue the airlines desperately need. Unfortunately, U.S. law bans in-flight gambling. The law that bans the operation of any type of gambling device on board an air carrier or foreign air carrier is entitled "Gambling restrictions. "2 In response to this law, a group of ten international airlines, known as the International Airline Coalition on the Rule of Law, is presently lobbying Congress to repeal its application.3 In challenging the federal law, the airlines claim that the United States' attempt to impose its national law extraterritorially is contrary to international law and treaties. This Comment examines the United States' ban on in-flight gambling on for eign air carriers servicing the United States. It argues that the Convention on Inter national Civil Aviation ("Chicago Convention"), grants the United States the author ity and the jurisdiction to impose such a law, arguments advanced by legal scholars Steven Grover, J.D., Texas Wesleyan to the contrary notwithstanding. However, in the interests of global harmony and to University School of ensure that the international civil aviation industry will continue to thrive as it has in Law; B.A., University the past, this Comment argues that the United States should repeal its ban on in of Calgary. flight gambling. Gaming Research & Review Journal • Volume 4, Issue 2 1 In analyzing this issue, this Comment first looks at the statute imposing the I ban and its legislative history. Next, this Comment examines the position of each party on this issue: first, the position of the United States and the reasons for enact ing this law, then, the position of the international airlines and their primary arguments and in Prior to 1994, there were no terests. The discussion then restrictions against gambling on explores the provisions of the Chicago Convention, which international flights. granted the United States juris diction to impose its ban on in- flight gambling. Finally, this Comment will argue that while the United States has both the authority and jurisdiction to ban in-flight gambling on international flights, Congress should repeal its ban with regard to foreign air carriers. I. Legislative History In examining this issue one needs to first look at the controlling statute and its legislative history. Prior to 1994, there were no restrictions against gambling on international flights. That period of relative freedom ended when Senator Slade Gorton, R-Washington, amended the then current law. The Gorton Amendment added the following language to the gambling restric tions law: "a foreign air carrier may not install, transport, or operate, or permit the use of any gambling device on board an aircraft in foreign air transportation."4 Thus, by prohibiting the transport of gambling devices on flights originating from, terminating in, or flying over the United States, the Gorton Amendment effectively banned in-flight gambling both by United States airlines and foreign air carriers, even while those flights are outside U.S. jurisdiction.5 By amending the law to include foreign-carrier flights to or from the United States, Congress attempted to level the playing field among international airlines. The intent was to avoid placing United States domestic airlines at a competitive disadvantage in providing international passenger service.6 Prior to the Gorton Amendment, U.S. air carriers were prohibited from offering in-flight gambling, but because of an "unintended loophole" in the law, foreign air carriers were not so encumbered.7 The year prior to the Gorton Amendment, U.S. air carriers had asked Con gress to permit them to offer gambling. However, uncertainty surrounding gaming on an air carrier prevented Congress from doing so. 8 The Gorton Amendment required that, within one year of its enactment, the Secretary of Transportation would complete a study of: ( 1) the aviation safety effects of gambling applications on electronic interactive video systems on board aircraft for passenger use, including an evaluation of the effect of such systems on the navigational and other electronic equipment of the aircraft, on the passengers and crew of the aircraft, and on issues relating to the method of payment; (2) the competitive implications of permitting foreign air carriers only, but not United States air carriers, to install, transport, and operate gambling applications on electronic interactive video systems on board aircraft in the foreign commerce of the 2 Gaming Research & Review Journal • Volume 4, Issue 2 Blackjack At Thirty Thousant Feet: America's Attempt To Enforce Its Ban On In-flight Gambling Extraterritorially United States on flights over international waters, or in fifth freedom city-pair mar kets; and (3) whether gambling should be allowed on international flights, including pro posed legislation to effectuate any recommended changes in existing law.9 In March 1996, the Department of Transportation presented its report to Con gress and recommended that, at that time, there should be no changes to the law prohibiting gambling in foreign transportation. 10 Instead, foreign airlines would have the opportunity to offer video gambling on flights other than those to or from the United States, and the Department would monitor foreign airlines' implementa tion of gambling and its development. 11 II. Position of the United States Government A. Competitive Consequences Congressional intent in amending the law to encompass non-U.S. air carrier flights to or from the United States was to avoid putting U.S. airlines at a competi tive disadvantage in providing international air service. 12 It is believed that if foreign air carriers could offer gam bling to passengers in flights to A law permitting foreign airlines to or from the United States, they offer in-flight video gambling would would enjoy a substantial rev enue advantage to their U.S. ri result in an additional $112 million vals.13 The Department of Transportation's report found per year in gambling revenue from the that the absence of video gam United States market. bling per se on U.S. airline inter national flights was not likely to have a material effect on U.S.- carrier share of international traffic; however, if in-flight gambling were offered, the report estimated that eighteen percent of international airline passengers would use it. 14 The restriction against U.S~ airlines offering in-flight gambling to their international passengers, could therefore, deprive them of a major revenue source that would be available to their foreign competitors. 15 The report estimated that video gambling would generate average revenues of $1 million per year per aircraft for the foreign airlines. 16 At that rate, a law permitting foreign airlines to offer in flight video gambling would result in an additional $112 million per year in gambling revenue from the United States market. 17 There was little concern that U.S. airlines would lose many of their interna tional customers to foreign airlines if the foreign airlines were permitted to offer gambling. Nevertheless, the additional revenue available to foreign air carriers could provide them with the flexibility to offer reduced fares to international airline passengers which could have a dramatic impact on the distribution of market share. Moreover, the extra revenues would help them in supporting their operations world wide.18 Due to the potential competitive consequences of permitting only foreign air carriers to offer video gambling and given the unwillingness of Congress to per mit it on international flights of domestic airlines, the law was amended to avoid Gaming Research & Review Journal • Volume 4, Issue 2 3 putting United States airlines at a competitive disadvantage to its foreign rivals in providing international passenger service. B. Socio-Economic Cost of Legalized Gambling Predictably, a concern that nearly always arises in connection with discus sions oflegalized gambling also arose during the discussion over legalized in-flight gambling, namely, the social and economic costs of gambling to the nation. 19 The last twenty years have seen legalized gambling become increasingly popular as it has rapidly spread across the United States.20 Arguing in favor of legalized gambling, proponents typically point to the potential economic benefits state and local communities would gain from it. 21 Opponents counter that employment and revenue benefits do not offset the significant socio-economic costs that arise from legalized gambling, including: (1) Problem and compulsive gambling, which leads to financial insolvency, decreased worker productivity due to absenteeism, increased white-collar crime to support gambling addiction, and child and spousal abuse in the families of compul sive gamblers. (2) Increased direct public expenditures, such as those for criminal justice, regulation, and public infrastructure to support gambling operations. (3) Political corruption by gambling interests. 22 Additionally, morality is always an issue in these discussions. Despite the con tinued growth oflegalized gambling in the United States since 1974, as can be seen by the enactment of this particular law, anti-gambling opponents have had some impact on Congress.

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